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On June 27, 2016, in McDonnell v. United States, the Supreme Court resolved a case of substantial interest to businesses that interact regularly with government officials with respect to grants, contracts, regulations and numerous other matters. The Court vacated the conviction of the former governor of Virginia, Bob McDonnell, because it was based on an improperly expansive interpretation of “official act” as used in the federal bribery statute. The Court’s opinion rejects the Department of Justice’s expansive interpretation of the relevant statutes and holds that a government official’s “setting up a meeting, calling another public official, or hosting an event does not, standing alone, qualify as an ‘official act’”—and, thus, is not sufficient to support a conviction. Instead, an honest services fraud allegation must involve:

“a decision or action on a ‘question, matter, cause, suit, proceeding or controversy’”;

“a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee”;

“something specific and focused that is ‘pending’ or ‘may by law be brought’ before a public official”; and

“[a] public official [who] make[s] a decision or take[s] an action on that ‘question, matter, cause, suit, proceeding or controversy,’ or agree[s] to do so.”

The McDonnell prosecution involved the former governor’s receipt, while in office, of more than $175,000 in gifts and loans from a Virginia businessman, Johnny Williams, who was promoting his “nutritional supplement company” and attempting to have studies performed on one of its products. The evidence described in the Court’s opinion indicated that, among other things, Governor McDonnell had arranged meetings, hosted events at the governor’s mansion for the benefit of Mr. Williams and his company and contacted other government officials to discuss whether state research universities would initiate studies of a nutritional supplement made by Mr. Williams’ company.

The former governor was convicted of violating several federal laws, including committing “honest services fraud.” That type of fraud is defined pursuant to the federal bribery statute, which, as the Court explained, “makes it a crime for ‘a public official or person selected to be a public official, directly or indirectly, corruptly’ to demand, seek, receive, accept, or agree ‘to receive or accept anything of value’ in return for being ‘influenced in the performance of any official act.’” The crucial issue in the case concerned the lower court’s interpretation of “official act”—and whether there was any evidence that Governor McDonnell had taken such an act on behalf of Mr. Williams or his company that was different than the normal acts routinely performed by government officials in support of constituents.

The relevant criminal statute, 18 U.S.C. § 201, defines “official act” as “any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit.” The Court explained that the Government must (1) “identify a ‘question, matter, cause, suit, proceeding or controversy’ that ‘may at any time be pending’ or ‘may by law be brought’ before a public official” and (2) “prove that the public official made a decision or took an action ‘on’ that question, matter, cause, suit, proceeding or controversy” (or agreed to do so).

With respect to the first requirement, the Court explained that the last four words of the statutory list—cause, suit, proceeding or controversy—“connote a formal exercise of governmental power, such as a lawsuit, hearing, or administrative determination.” Although the dictionary contains broad definitions of the first two words in that list (“question” and “matter”), the Court applied the interpretive canon noscitur a sociis (“a word is known by the company it keeps”) and held that for criminal liability to attach as a “question” or “matter,” the issue being resolved by the government official must be “similar in nature to a ‘cause, suit, proceeding, or controversy.’” A public official’s actions setting up a meeting, call or event are not “of the same stripe” as the four listed actions—and thus do not qualify under the statute. However, the Court agreed with the Fourth Circuit that the government had proved at trial three “questions or matters”: whether state universities would study the nutritional supplement made by Mr. Williams’ company, whether grant money would be allocated for the supplement from a state commission and whether the state health insurance plan would include the supplement.

The Court also addressed the second question under the bribery statute—whether the evidence revealed any “decision or . . . action.” As the amici who filed briefs at the Court explained, public officials are constantly arranging and conducting meetings, hosting events and calling other public officials for constituents. The Court held that such activities, “standing alone,” do not qualify as “a ‘decision or action’ within the meaning of” the bribery statute. Instead, the statute “specifies that the public official must make a decision or take an action on that question or matter, or agree to do so.” In the McDonnell case, for example, a decision to initiate a research study (or a qualifying step such as narrowing the field of potential research studies) in favor of Mr. Williams’ company would qualify as an official act. Merely listening to a constituent’s concerns or requests is not sufficient.

The Court’s McDonnell decision clarifies the boundaries for public officials—and companies and their officials, who interact with government on a broad range of business issues. The opinion should help resolve many businesses’ concerns regarding the Department of Justice’s interpretation of the federal bribery laws—a position a bipartisan group of former public officials, whose amicus brief was quoted by the Court, characterized as a “breathtaking expansion of public-corruption law [that] would likely chill federal officials’ interactions with the people they serve and thus damage their ability effectively to perform their duties.” Although the facts of the McDonnell case are “no doubt … distasteful”—with “tawdry tales of Ferraris, Rolexes, and ball gowns”—a boundless interpretation of the federal bribery statute by the US government would have criminalized a substantial amount of innocent conduct in which business representatives meet with government officials to address legitimate concerns.

The Court’s ruling in the McDonnell case likely will have implications on the aggressive charging by prosecutors, who will no doubt be compelled to make stronger connections between official acts and improper influence on those government actors. And companies that regularly interact with government personnel will need to remain diligent in both understanding ethical restraints on business relationships with government officials and have a clear compliance and training program (particularly for customer-facing personnel, including government relations professionals).

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